“Music streaming and digital audio continue to see massive growth, and
this quarter we took key steps to position Pandora to capture this
significant opportunity,” said Roger Lynch, CEO of Pandora. “We improved
audience metrics—in part by increasing usage of Premium Access, which
gives ad-supported listeners the ability to enjoy Pandora Premium after
viewing a 15-second ad. We also accelerated our ad-tech roadmap with the
acquisition of AdsWizz, and launched exciting new product features like
personalized playlists. Looking ahead, Pandora is exactly where we want
to be: at the center of a growing market with huge potential.”

First Quarter 2018 Financial Results & Highlights

Revenue: For the first quarter of 2018, total consolidated
revenue was $319.2 million, an approximate 12% year-over-year increase
compared to the year-ago quarter, excluding Australia, New Zealand and
Ticketfly. This included $214.6 million in advertising revenue and
$104.7 million in subscription revenue. We discontinued our service in
Australia and New Zealand on July 31, 2017, and Ticketfly was sold to
Eventbrite on September 1, 2017.

GAAP Net Loss and Adjusted EBITDA: For the first quarter of 2018,
GAAP net loss was $131.7 million compared to a net loss of $132.3
million in the same quarter last year. Adjusted EBITDA was a loss of
$73.3 million, compared to a loss of $71.3 million in the same quarter
last year.

Cash and Investments: For the first quarter of 2018, the Company
ended with $544.4 million in cash and investments, compared to $500.8
million at the end of the prior quarter.

Strategic Acquisition: Pandora announced the acquisition of
AdsWizz, signaling a clear acceleration of our ad tech capabilities,
allowing us to transition from the largest ad supported digital audio
publisher to the largest ad supported digital audio platform. AdsWizz
has customers in 39 countries, and offers a full stack of tools and
services ranging from programmatic audio on both the demand and supply
sides to ad serving technology to ROI measurement to podcast tools and
self-serve capabilities.

Product & Partnership Launches: Premium Access, which has
been used by approximately 13 million listeners to date, continues to
showcase the full capabilities of our premiere subscription product, for
free, following a view of a 15-second ad. The Company additionally
launched Personalized Soundtracks, which provide unique playlists
tailored for each listener and are powered by the Music Genome
Project—one of the richest data-sets of music information in the world.

Pandora also continued to expand its footprint, launching Pandora
Premium on Amazon Fire TV, Fitbit Versa and on the web in the first
quarter. Additionally, Pandora announced a partnership with leading
smart link aggregator, Linkfire, to make discovering music easier for
fans, while amplifying marketing efforts for labels and artists.

Listener Hours: Total listener hours were 4.96 billion for the
first quarter of 2018, compared to 5.21 billion for the same period of
the prior year.

Active Listeners: Active listeners were 72.3 million at the end
of the first quarter of 2018.

Subscribers: Pandora Plus and Pandora Premium subscribers were
5.63 million at the end of the first quarter of 2018.

Other Information

Guidance: Guidance will be discussed during the first quarter
2018 conference call.

First Quarter 2018 Financial Results Conference Call: Pandora
will host a conference call today at 2 p.m. PT/5 p.m. ET to discuss
first quarter 2018 financial results with the investment community. A
live webcast of the event will be available on the Pandora Investor
Relations website at http://investor.pandora.com.
A live domestic dial-in is available at (877) 355-0067 or (614) 999-7532
internationally. A domestic replay will be available at (855) 859-2056
or (404) 537-3406 internationally, using passcode 1771049, and
available via webcast replay until May 24, 2018.

ABOUT PANDORA

Pandora is the world’s most powerful music discovery platform—a place
where artists find their fans and listeners find music they love. We are
driven by a single purpose: unleashing the infinite power of music by
connecting artists and fans, whether through earbuds, car speakers, or
anywhere fans want to experience it. Our team of highly trained
musicologists analyze hundreds of attributes for each recording which
powers our proprietary Music Genome Project®, delivering billions of
hours of personalized music tailored to the tastes of each music
listener, full of discovery, making artist/fan connections at
unprecedented scale. Founded by musicians, Pandora empowers artists with
valuable data and tools to help grow their careers and connect with
their fans.

"Safe harbor" Statement: This press release contains
forward-looking statements within the meaning established by the Private
Securities Litigation Reform Act of 1995, including, but not limited to,
statements regarding expected revenue and adjusted EBITDA, and the
benefits to Pandora from the acquisition of AdsWizz. These
forward-looking statements are based on Pandora's current assumptions,
expectations and beliefs and involve substantial risks and uncertainties
that may cause results, performance or achievement to materially differ
from those expressed or implied by these forward-looking statements.
Factors that could cause or contribute to such differences include, but
are not limited to: our operation in an emerging market and our
relatively new and evolving business model; our ability to estimate
revenue reserves; our ability to increase our listener base and listener
hours; our ability to attract and retain advertisers; our ability to
generate additional revenue on a cost-effective basis; competitive
factors; our ability to continue operating under existing laws and
licensing regimes; our ability to enter into and maintain commercially
viable direct licenses with record labels for the right to reproduce and
publicly perform sound recordings on our service; our ability to
establish and maintain relationships with makers of mobile devices,
consumer electronic products and automobiles; our ability to manage our
growth and geographic expansion; our ability to continue to innovate and
keep pace with changes in technology and our competitors; our ability to
expand our operations to delivery of non-music content; our ability to
protect our intellectual property; risks related to service
interruptions or security breaches; and general economic conditions
worldwide. Further information on these factors and other risks that may
affect the business are included in filings with the Securities and
Exchange Commission (SEC) from time to time, including under the heading
“Risk Factors” in our most recent reports on Form 10-K and Form 10-Q.

The financial information contained in this press release should be read
in conjunction with the consolidated financial statements and notes
thereto included in our most recent reports on Form 10-K and Form 10-Q,
each as they may be amended from time to time. Our results of operations
for the current period are not necessarily indicative of our operating
results for any future periods.

These documents are available online from the SEC or on the SEC Filings
section of the Investor Relations section of our website at investor.pandora.com.
Information on our website is not part of this release. All
forward-looking statements in this press release are based on
information currently available to the Company, which assumes no
obligation to update these forward-looking statements in light of new
information or future events.

Non-GAAP Financial Measures: To supplement our condensed
consolidated financial statements, which are prepared and presented in
accordance with accounting principles generally accepted in the United
States ("GAAP"), the Company uses the following non-GAAP measures of
financial performance: non-GAAP gross profit, non-GAAP net loss,
non-GAAP basic and diluted net loss per common share, adjusted EBITDA,
non-GAAP product development, non-GAAP sales and marketing and non-GAAP
general and administrative. The presentation of this additional
financial information is not intended to be considered in isolation
from, as a substitute for, or superior to, the financial information
prepared and presented in accordance with GAAP. These non-GAAP measures
have limitations in that they do not reflect all of the amounts
associated with our results of operations as determined in accordance
with GAAP. In addition, these non-GAAP financial measures may be
different from the non-GAAP financial measures used by other companies.
These non-GAAP measures should only be used to evaluate our results of
operations in conjunction with the corresponding GAAP measures.
Management compensates for these limitations by reconciling these
non-GAAP financial measures to the most comparable GAAP financial
measures within our earnings releases.

Non-GAAP gross profit, non-GAAP net loss, non-GAAP basic and diluted net
loss per common share, non-GAAP product development, non-GAAP sales and
marketing and non-GAAP general and administrative differ from GAAP in
that they exclude stock-based compensation expense, intangible
amortization expense, amortization of non-recoupable ticketing contract
advances, expense associated with the restructurings, transaction costs
and loss on sales of subsidiaries. The income tax effects of non-GAAP
pre-tax loss have been reflected in non-GAAP net loss and non-GAAP basic
and diluted net loss per common share.

Stock-based Compensation Expense: consists of expenses for stock
options, restricted stock units and other awards under our equity
incentive plans. Stock-based compensation is included in the following
cost and expense line items of our GAAP presentation: cost of
revenue—other, cost of revenue—ticketing service, product development,
sales and marketing and general and administrative.

Although stock-based compensation is an expense for the Company and is
viewed as a form of compensation, management excludes stock-based
compensation from our non-GAAP measures and adjusted EBITDA results for
purposes of evaluating our continuing operating performance primarily
because it is a non-cash expense not believed by management to be
reflective of our core business, ongoing operating results or future
outlook. In addition, the value of stock-based instruments is determined
using formulas that incorporate variables, such as market volatility,
that are beyond our control.

Provision for Income Taxes: consists of expense recognized
related to U.S. and foreign income taxes. The Company considers its
adjusted EBITDA results without these charges when evaluating its
ongoing performance because it is not believed by management to be
reflective of our core business, ongoing operating results or future
outlook.

Depreciation and Intangible Amortization Expense: consists of
non-cash charges that can be affected by the timing and magnitude of
business combinations and asset purchases. Depreciation and intangible
amortization expense is included in the following cost and expense line
items of our GAAP presentation: cost of revenue—other, cost of
revenue—ticketing service, product development, sales and marketing and
general and administrative. Depreciation and intangible amortization
expense also consists of non-cash amortization of non-recoupable amounts
paid in advance to the Company’s clients pursuant to ticketing
agreements. Amortization of non-recoupable ticketing contract advances
is included in the sales and marketing line of our GAAP presentation.
Management considers its operating results without intangible
amortization expense and amortization of non-recoupable ticketing
contract advances when evaluating its ongoing non-GAAP performance and
without depreciation, intangible amortization expense and amortization
of non-recoupable ticketing contract advances when evaluating its
ongoing adjusted EBITDA performance because these charges are non-cash
expenses that can be affected by the timing and magnitude of business
combinations, asset purchases and new client agreements and may not be
reflective of our core business, ongoing operating results or future
outlook.

Other Expense: consists primarily of interest expense related to
our Convertible Senior Notes and our Credit Facility. The Company
considers its adjusted EBITDA results without these charges when
evaluating its ongoing performance because it is not believed by
management to be reflective of our core business, ongoing operating
results or future outlook.

Expense Associated with the Restructurings: consists of
employee-related expense recognized in connection with the workforce
reductions in the first quarters of 2018 and 2017 and the restructuring
in Australia and New Zealand. These costs are included in the following
cost and expense line items of our GAAP presentation: cost of
revenue—other, product development, sales and marketing and general and
administrative. This also consists of professional fees recognized in
connection with the reorganization of the Company in the first quarters
of 2017 and 2018, which are included in the general and administrative
line item of our GAAP presentation. The Company considers its non-GAAP
and adjusted EBITDA results without these charges when evaluating its
ongoing performance because these charges are not believed by management
to be reflective of our core business, ongoing operating results or
future outlook.

Transaction Costs: consists of professional and legal fees
recognized during the period, primarily related to the AdsWizz, Inc.
acquisition. These costs are included in the general and administrative
line item of our GAAP presentation. The Company considers its non-GAAP
and adjusted EBITDA results without these charges when evaluating its
ongoing performance because these charges are not believed by management
to be reflective of our core business, ongoing operating results or
future outlook.

Loss on Sales of Subsidiaries: consists of loss on sales of
subsidiaries recognized during the period, primarily related to the
Ticketfly disposition, including the cancellation of the convertible
promissory note receivable. These amounts were calculated as the
decrease in the fair value less costs to sell for sales of our
subsidiaries and were recorded as loss on sales during the period. The
Company considers its operating results without these charges when
evaluating its ongoing non-GAAP and adjusted EBITDA results because
these charges are not believed by management to be reflective of our
core business, ongoing operating results or future outlook.

Income Tax Effects of Non-GAAP Pre-tax Loss: The Company adjusts
non-GAAP pre-tax net loss by considering the income tax effects of its
non-GAAP adjustments. The Company is currently forecasting a non-GAAP
effective tax rate of approximately 22% to 25% cumulatively for each
quarter and the full year 2018. However, the Company is not expected to
incur any material cash taxes due to its net operating loss position.

Management believes these non-GAAP financial measures and adjusted
EBITDA serve as useful metrics for our management and investors because
they enable a better understanding of the long-term performance of our
core business and facilitate comparisons of our operating results over
multiple periods and to those of peer companies, and when taken together
with the corresponding GAAP financial measures and our reconciliations,
enhance investors' overall understanding of our current financial
performance.

In the financial tables below, the Company provides a reconciliation of
the most comparable GAAP financial measure to the historical non-GAAP
financial measures used in this earnings release.

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